Atour's second-quarter revenue grew 41% and FY26 guidance was raised, with retail and supply chain continuing to drive strong growth

Overview

Morgan Stanley reviews Atour Lifestyle Holdings' 2Q26 results and believes revenue performance was slightly above expectations, primarily driven by retail product upgrades, supply chain optimization, and hotel network expansion. Although changes in the business mix weighed on margins, the company raised its FY26 revenue guidance again and its expense-ratio outlook also improved. The report therefore slightly raises its FY26 forecasts, while leaving the existing investment thesis unchanged.

Core views

Revenue growth significantly outpaced profit growth in 2Q26. Atour's total revenue reached RMB3.490 billion, up 41% YoY, exceeding Morgan Stanley's forecast of RMB3.451 billion and consensus expectations of RMB3.279 billion. F&M revenue was RMB1.725 billion, up 33% YoY, also above Morgan Stanley's forecast of RMB1.704 billion and consensus expectations of RMB1.652 billion; L&O revenue was RMB132 million, down 12% YoY; retail and other revenue was RMB1.633 billion, up 60% YoY, including retail revenue of RMB1.575 billion, up 63% YoY. The revenue beat was primarily attributable to stronger-than-expected supply chain and retail businesses. The company therefore raised its FY26 total revenue and retail revenue growth guidance by a further 4 and 5 percentage points, respectively. This was its second guidance upgrade in 2026 and reflected 1H26 results exceeding the original plan. Profit continued to grow, but changes in the business mix put pressure on margins. Adjusted EBITDA in 2Q26 was RMB821 million, up 35% YoY, exceeding Morgan Stanley's forecast of RMB812 million and consensus expectations of RMB775 million; the adjusted EBITDA margin was 23.5%, down from 24.7% in 2Q25. Core net profit was RMB558 million, up 31% YoY, slightly below Morgan Stanley's forecast of RMB564 million but above consensus expectations of RMB544 million; the core net margin declined from 17.3% a year earlier to 16.0%. The report notes that the company's guidance for a slight decline in the full-year core net margin remains unchanged, but the reason has shifted to higher-than-expected contributions from lower-margin retail and supply chain businesses rather than deterioration in core operations. Room-rate performance in the hotel business was relatively stable, while expansion remained the main source of growth. Blended RevPAR grew 0.7% YoY in 2Q26, while same-hotel RevPAR declined 3% YoY. The company stated that July RevPAR was affected by weather and delayed summer travel, but performance subsequently stabilized. The company recorded 87 net hotel openings in 2Q26 and 160 cumulative net openings in 1H26, equivalent to 40% of its full-year plan; F&M room count grew 19% YoY, with growth slowing as expected. The report assesses the quality of lodging-business growth by considering the hotel-opening pace, RevPAR changes, and per-room operating performance together, rather than relying solely on a single revenue growth metric. Retail was the strongest growth engine this quarter. Retail revenue grew 63% YoY in 2Q26, above 54% in 1Q26 but slightly below 67% in FY25. Growth was driven by product upgrades and supply chain optimization, with comforter-category GMV increasing 80% YoY. Retail gross margin edged down to 51% because comforters and new products, which have relatively lower gross margins, accounted for a larger share. The report therefore emphasizes both the retail business's high growth and its structural margin pressure: faster retail expansion boosts group revenue but dilutes the blended margin in the short term. Supply chain revenue grew 45% YoY in 2Q26, mainly due to higher procurement per room before new hotel openings. Supply chain growth is linked to hotel openings, but its margin is lower than that of the mature hotel management business, making it another structural cause of the decline in the group's margin. On the other hand, faster revenue growth improved expense absorption. The company now expects the G&A and technology expense ratio to remain stable, compared with its previous expectation of an increase; the ratio was 5% in 1H26, unchanged from a year earlier. This means that although the revenue mix reduced gross and net margins, the operating expense ratio did not deteriorate in the previously feared direction. The shareholder return plan remains on track. The company's 1H26 share repurchases, together with the US$73 million dividend paid in 1Q26, totaled US$184 million, putting it on course to meet its target of returning at least US$230 million to shareholders in FY26. The report treats capital returns alongside sustained growth as part of the investment thesis but does not change its existing rating assessment. Morgan Stanley's model forecasts EPS of RMB11.61, RMB13.65, RMB16.12, and RMB17.26 for FY25 through FY28, respectively; net revenue of RMB9.790 billion, RMB12.958 billion, RMB15.592 billion, and RMB17.730 billion; EBITDA of RMB2.361 billion, RMB2.720 billion, RMB3.266 billion, and RMB3.487 billion; and ModelWare net profit of RMB1.621 billion, RMB1.907 billion, RMB2.254 billion, and RMB2.412 billion. The corresponding P/E multiples are 23.8x, 18.2x, 15.4x, and 14.4x; P/BV multiples are 10.7x, 8.9x, 7.0x, and 5.7x; ROE is 54.8%, 53.1%, 57.6%, and 48.5%; and EV/EBITDA multiples are 13.9x, 10.2x, 8.2x, and 7.3x. The report signals that consensus EPS estimates for the next 12 months are likely to be moderately revised upward, while Morgan Stanley itself only slightly raises its FY26 forecast. Valuation is based on a base-case DCF. Key assumptions include a 10.5% WACC and a 2% perpetual growth rate for the US-listed Chinese hotel companies under coverage. The report forecasts an EBITDA CAGR of 13.5% from 2025 to 2030 as the brand matures, followed by 8% thereafter, with the valuation implying 12x 2026E EV/EBITDA. This yields a US$45.00 price target, representing 22% upside from the US$37.00 share price on August 20, 2026, while the Overweight rating and Attractive industry view are maintained. Upside scenarios listed in the report include more hotel openings than expected, lower-than-expected reinvestment costs, higher industry RevPAR, and improved retail margins; downside scenarios include retail sales growth falling below 15%, industry RevPAR declining YoY in 2026 despite recent improvement, and value-destructive acquisitions.

Analysis framework

The report first compares 2Q26 revenue, profit, and margins for each business with the prior-year period, Morgan Stanley's forecasts, and consensus expectations, and then explains the differences through hotel openings, room growth, RevPAR, the retail product mix, and supply chain procurement. It subsequently adjusts its FY26 forecasts based on management's raised guidance and its expense-ratio and margin outlook, and uses DCF valuation to connect long-term EBITDA growth, the cost of capital, the perpetual growth rate, the price target, and potential upside, before presenting upside and downside valuation scenarios.

Methodology notes

• Valuation MethodDCF

  Base-case DCF valuation

  The report discounts future operating cash flows using long-term growth assumptions, applying a 10.5% WACC and a 2% perpetual growth rate to derive a US$45.00 price target.

• Valuation MethodEV/EBITDA valuation

  Implied 2026E EV/EBITDA multiple

  The DCF result is also converted into approximately 12x 2026E EV/EBITDA to illustrate the operating valuation level corresponding to the price target; the model table shows 2026E EV/EBITDA of 10.2x based on the current price.

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Decomposition of hotel count, room growth, and RevPAR

  The report separately examines net hotel openings, F&M room growth, and RevPAR to distinguish volume growth from hotel and room expansion from operating changes driven by same-hotel room rates and occupancy performance.

• (Out-of-Vocabulary Method)

  Morgan Stanley ModelWare framework

  Unless otherwise stated, the report's earnings forecasts and valuation metrics are based on Morgan Stanley's ModelWare framework and are compared with consensus expectations.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Atour Lifestyle Holdings Ltd (ATAT.O/ATAT.US)

  The core company covered in this report; 2Q26 results were slightly above expectations, with retail, supply chain, and hotel network expansion jointly driving revenue growth.

  Strengths

  Retail revenue grew 63% YoY, supply chain revenue grew 45%, FY26 revenue guidance was raised again, and the expected G&A and technology expense ratio was revised from an increase to stability.

  Weaknesses

  The increased contribution from lower-margin retail and supply chain businesses reduced the adjusted EBITDA margin, core net margin, and retail gross margin.

  Comparison

  2Q26 total revenue exceeded Morgan Stanley and consensus expectations; core net profit was slightly below Morgan Stanley's forecast but above consensus expectations.

  Risks

  Retail sales growth falling below 15%, industry RevPAR declining YoY in 2026, and value-destructive acquisitions.

Key data

• 2Q26 Total RevenueRMB3.490 billionUp 41% YoY; Morgan Stanley forecast RMB3.451 billion, while consensus expected RMB3.279 billion.
• 2Q26 F&M RevenueRMB1.725 billionUp 33% YoY; Morgan Stanley forecast RMB1.704 billion, while consensus expected RMB1.652 billion.
• 2Q26 L&O RevenueRMB132 millionDown 12% YoY.
• 2Q26 Retail RevenueRMB1.575 billionUp 63% YoY, above 54% in 1Q26; FY25 growth was 67%.
• 2Q26 Adjusted EBITDARMB821 millionUp 35% YoY; margin was 23.5%, compared with 24.7% a year earlier.
• 2Q26 Core Net ProfitRMB558 millionUp 31% YoY; core net margin was 16.0%, compared with 17.3% a year earlier.
• 2Q26 Blended RevPAR+0.7% YoYSame-hotel RevPAR declined 3% YoY.
• 1H26 Net Hotel Openings160 hotelsNet openings totaled 87 in 2Q26, bringing cumulative progress to 40% of the full-year target.
• F&M Room Growth19%Growth slowed as expected.
• Comforter-Category GMV Growth80% YoYProduct upgrades drove strong retail growth in 2Q26.
• 2Q26 Supply Chain Revenue Growth45% YoYPrimarily driven by higher procurement per room before new hotel openings.
• Retail Gross Margin51%Declined slightly due to higher contributions from comforters and new products.
• 1H26 G&A and Technology Expense Ratio5%Unchanged from a year earlier; the company revised its outlook from an expected increase to an expectation of stability.
• FY26 Revenue Guidance AdjustmentTotal revenue growth raised by 4 percentage points; retail revenue growth raised by 5 percentage pointsThis was the company's second increase to the relevant guidance in 2026.
• FY26 Shareholder Return TargetAt least US$230mn1H26 share repurchases and the US$73mn dividend paid in 1Q26 totaled US$184mn.
• FY26 ForecastEPS of RMB13.65; revenue of RMB12.958 billion; EBITDA of RMB2.720 billionCorresponding to P/E of 18.2x and EV/EBITDA of 10.2x.
• Key DCF AssumptionsWACC 10.5%; perpetual growth rate 2%EBITDA CAGR is projected at 13.5% from 2025 to 2030 and 8% thereafter.
• Rating and Price TargetOverweight; US$45.00Implies potential upside of 22% relative to the current price of US$37.00.

Impact & implications

The report believes Atour's current growth profile is being jointly driven by hotel expansion, retail, and supply chain, making revenue more resilient than previously expected. A higher contribution from lower-margin businesses will cause the FY26 core net margin to decline slightly, but faster revenue growth means the G&A and technology expense ratio no longer faces the previously expected upward pressure. Another guidance upgrade, moderate forecast revisions, and shareholder returns progressing as planned collectively support the report's existing bullish stance and US$45.00 price target.

Risks

• Retail sales growth could slow to below 15% annually, weakening the current strongest revenue growth engine.
• Despite recent improvement, industry RevPAR could still decline YoY in 2026.
• Value-destructive acquisitions could occur.
• A continued increase in the contribution from lower-margin retail and supply chain businesses could further reduce the group's margins.

What to watch

• Monitor subsequent changes in blended and same-hotel RevPAR after the impact of July weather and delayed summer travel stabilizes.
• Monitor whether full-year net hotel openings and F&M room growth remain on plan.
• Monitor whether growth in retail revenue, comforter GMV, and new products can be sustained, while observing whether the retail gross margin improves.
• Monitor procurement per room for new hotels and the sustainability of supply chain revenue growth.
• Monitor whether the G&A and technology expense ratio remains stable and whether the core net margin declines only slightly.
• Monitor progress toward the FY26 shareholder return target of at least US$230mn.
• Monitor upside scenarios such as above-expectation hotel openings, lower reinvestment costs, higher industry RevPAR, or improved retail margins.